Key things to know before launching a blockchain business

Industries: Finance
Trends: Blockchain
  • The founding team must possess tech skills
  • How to attract funds even if the crypto market is volatile
  • Blockchain’s benefits are accessible to many companies
  • Investors are betting big on blockchain

It took less than a decade for blockchain to move from a fringe idea to a promising technology embraced by many investors and entrepreneurs. In the first nine months of 2018, for instance, nearly $3.9 billion in venture capital (VC) investments was poured into this sector – a whopping 280 per cent rise compared to the whole of 2017. Initial Coin Offerings (ICOs) were even more successful, providing startups with over $10 billion in 2018 alone. And as the promise of blockchain lures a growing number of startups, it’s important to have a good grasp of the key aspects of this technology and dispel potentially wrong expectations.

Starting a blockchain-based business is in many ways similar to starting any other business. You need to have a good product, excellent marketing, a skilful founding team, and – preferably – deep-pocketed investors. But blockchain makes a difference in how you get all these things. It provides companies with an unconventional way of attracting investor money through ICOs, and can improve business operations through efficient smart contracts, better cyber-security, and improved user privacy. These benefits aren’t only available to blockchain-focused companies, but to a large range of other businesses like manufacturers, retailers, and many others.

The founding team must possess tech skills

As a distributed ledger that stores cryptographically protected transactions on thousands of computers, blockchain is both an exciting and complex technology. It’s a tech ecosystem where things move fast, and that’s why Ali Ayyash, the founder and CEO of the blockchain firm Lumeousa, warns that founding teams need “to possess technical skill” in blockchain and that everyone in the team will “need to collaborate across specialties, and you’ll need to be able to do it quickly”. Connecting with people who have experience in this field is critical, too. Absorbing lessons learned by other companies can prevent costly mistakes such as insufficient testing prior to product launch, or loss of cryptographic keys needed to access crypto coins.

Digital globe with illuminated dots and lines
As a distributed ledger that stores cryptographically protected transactions on thousands of computers, blockchain is both an exciting and complex technology.

Talking with blockchain experts will also help to broaden your horizon in terms of the possibilities blockchain can offer. This technology isn’t only suitable for managing cryptocurrencies; it also has the potential to transform a range of industries. For example, the cloud storage company Storj is using blockchain to develop a cheaper way of storing data on the cloud, relying on the excess hard drive space of millions of users worldwide. Keeping in mind that the value of the traditional cloud market is around $100 billion, it’s not difficult to see that blockchain cloud services have great potential. uses blockchain to run its ticketing software, promising better protection against fraud compared to conventional competitors. A good product idea is just the first step in building your business, however. Securing funding is the next important task.

How to attract funds even if the crypto market is volatile

Blockchain startups can approach VC investors like any other company and pitch their idea to get funding. But if that doesn’t work out, or if you don’t want to give other people ownership in your company, an ICO is a potential solution. It’s similar to offering shares of a private company to the public through an Initial Public Offering (IPO), except that instead of shares, investors receive cryptocurrency tokens. And if the startup they financially support succeeds, those tokens will grow in value and investors can sell them on the crypto exchange market, earning big profits. This approach was used by many startups to raise billions of dollars, but it’s a highly competitive process in which the investors’ interest fluctuates depending on the value of cryptocurrencies like Bitcoin and Ethereum.

There are, however, a few proven tactics that can increase the chance of a successful ICO in any market condition. A clear and concise whitepaper that explains the technical aspects of your project and the team behind it is crucial. What follows next is an integrated marketing approach using “a combination of PR, ICO listing websites, YouTube reviews and perhaps a TV interview or two”, as the entrepreneur Andrew Medal argues. But what really makes a difference in his opinion is an experienced advisory and founding team that conveys a sense of trust to investors that the business plan can be efficiently executed. And with a little bit of luck and a community of fans on Telegram – a chatting app that crypto companies often use to communicate – your blockchain idea could get traction and earn the millions of dollars needed to make it a reality.

Blockchain’s benefits are accessible to many companies

It’s easy to see how blockchain can enable startups to raise cash and fast-track their business plan. But the benefits that this technology offers go way beyond that, and more importantly, they’re available even to startups and companies that aren’t blockchain-based. For example, a smart contract is a self-enforcing contract written in computer code and stored on blockchain. It executes automatically when certain conditions are met, like payment or delivery of a product. What’s more, those contracts are unbreakable and don’t require an often expensive third party to create and enforce them. The possible applications of this concept are vast, and one of them was developed by Slock, a blockchain-based IoT platform. This company has created a system that allows users to rent bicycles by unlocking a smart lock once both parties agree on the terms of a smart contract.

Man with suitcase in front of whiteboard with financial graphs
It’s easy to see how blockchain can enable startups to raise cash and fast-track their business plan.

Blockchain can also help companies to be more transparent about their supply chain. One startup, Provenance, created software that allows retailers and other businesses to show how their products were sourced, handled, and distributed. Furthermore, the immutable and decentralised nature of blockchain can help businesses build customer trust by boosting their protection against cyber-attacks and preventing data breaches such as the ones companies like Facebook, Equifax, HBO, and many others have already fallen victim to. Finally, blockchain-based apps like Bitwage offer businesses an option to pay their international staff via Bitcoin. The company promises lower fees than banks, and faster processing of payments.

Investors are betting big on blockchain

Blockchain has the potential to disrupt multiple sectors and investors are betting big on this technology. Billions of dollars invested in hundreds of startups has empowered entrepreneurs to develop ever more creative applications for this technology. And while starting a blockchain-based business comes with specific challenges, you still also need to develop a good product that customers want to use and have skilful founders who know how to impress investors. Blockchain helps startups achieve these things by enabling ICOs, smart contracts, better cyber-security, and many other things. Luckily, these benefits can be enjoyed by non-blockchain companies, too, ensuring that customers across many industries receive better products and services.

Industries: Finance
Trends: Blockchain
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